What changed
RBI issued a consolidated notification (DNBS.193 DG(VL)-2007) updated as on June 30, 2013, replacing the earlier 1998 prudential norms. The update brings all current instructions on income recognition, asset classification, provisioning, capital adequacy, and other prudential requirements into one place for non-deposit taking NBFCs.
What it means for you
Non-deposit taking NBFCs must comply with the updated consolidated prudential norms, which cover income recognition, asset classification, provisioning, capital adequacy (paragraph 16), and concentration of credit/investment (paragraph 18). Certain exemptions apply to loan companies, investment companies, and non-systemically important asset finance companies from capital adequacy and concentration norms. The directions are effective immediately from July 1, 2013.
What you must do
- Review and align your NBFC's policies with the updated prudential norms, especially income recognition, asset classification, and provisioning requirements.
- Ensure compliance with capital adequacy norms (paragraph 16) and concentration of credit/investment limits (paragraph 18) if your NBFC is systemically important or not exempted.
- Submit the required statutory auditor certificate to RBI as per paragraph 15.
- Update your board-approved policy on demand/call loans as per paragraph 7.
- Maintain proper disclosures in the balance sheet as per paragraph 10 and schedule requirements.
Who it affects
All non-deposit accepting or holding NBFCs, Infrastructure finance companies, Systemically important non-deposit taking NBFCs, Loan companies, investment companies, and asset finance companies (with exemptions)
Which NBFCs are exempt from capital adequacy and concentration norms?
Loan companies, investment companies, and asset finance companies that are not systemically important non-deposit taking NBFCs are exempt from paragraphs 16 (capital adequacy) and 18 (concentration of credit/investment).
What is the effective date of these updated directions?
The directions came into force with immediate effect from July 1, 2013, superseding the 1998 prudential norms.
Do investment companies holding over 90% in group/subsidiary securities need to follow all norms?
Such investment companies are exempt from the directions entirely, provided they do not accept public deposits and are not systemically important. However, if they are systemically important, paragraphs 16 and 18 apply.